An eXcellent review from Bloomberg:
Euro Area Headed for Break-Up, SocGenÃ¢â‚¬â„¢s Edwards Says (Update1)
By Alexis Xydias
Feb. 12 (Bloomberg) — Southern European countries are trapped in an overvalued currency and suffocated by low competitiveness, a situation that will lead to the break-up of the euro bloc, according to Societe Generale SA strategist, Albert Edwards.
The problem for countries including Portugal, Spain and Greece Ã¢â‚¬Å“is that years of inappropriately low interest rates resulted in overheating and rapid inflation,Ã¢â‚¬Â London-based Edwards wrote in a report today. Even if governments Ã¢â‚¬Å“could slash their fiscal deficits, the lack of competitiveness within the euro zone needs years of relative (and probably given the outlook elsewhere, absolute) deflation. Any help given to Greece merely delays the inevitable break-up of the euro zone.Ã¢â‚¬Â
The euro has slumped 9.9 percent against the dollar since November on concern countries including Greece will struggle to tame their budget deficits. The common currency and stocks in the region dropped yesterday as European leaders closed ranks to defend Greece in a plan that investors said lacked details.
The euro fell for a third day against the dollar, to $1.3557 as of 10:35 a.m. in London. EuropeÃ¢â‚¬â„¢s recovery almost stalled in the fourth quarter, as gross domestic product in the 16-nation euro region rose a less-than-expected 0.1 percent from the third quarter, the European UnionÃ¢â‚¬â„¢s statistics office in Luxembourg said today.
EU WON’T SPLIT SAYS AN ITALIAN
Tommaso Padoa-Schioppa, a former European Central Bank executive board member and Italian finance minister, said today there was no possibility of a partition of the euro-zone.
Ã¢â‚¬Å“I donÃ¢â‚¬â„¢t think there is any prospect for such an event and I donÃ¢â‚¬â„¢t think it makes much sense to talk about it,Ã¢â‚¬Â he said in an interview on Bloomberg Television.
After a three-month long plunge in GreeceÃ¢â‚¬â„¢s bonds amid speculation it was facing the threat of default, the euro regionÃ¢â‚¬â„¢s leaders yesterday ordered the country to slash its budget deficit and warned investors they would be willing to defend the country from speculative attack if necessary.
Portuguese and Spanish bonds also declined this month on concern those countries may also need to cut spending.
Prime Minister George PapandreouÃ¢â‚¬â„¢s drive to get GreeceÃ¢â‚¬â„¢s ballooning budget under control is being challenged in the streets by striking schools, hospitals and airline employees.
Ã¢â‚¬Å“Unlike Japan or the U.S., Europe has an unfortunate tendency towards civil unrest when subjected to extreme economic pain,Ã¢â‚¬Â Edwards wrote. Consigning the countries in southern Europe with the weakest finances Ã¢â‚¬Å“to a prolonged period of deflation is most likely to impose too severe a test on these nations.Ã¢â‚¬Â
DR. PINNA SAYS:
Being an Italian national, and having spent much time throughout Europe, I can say, quite frankly, that the Europeans are very spoiled fat cats.
None of the Europeans want to work in, what they consider, jobs that are “low class.” Farming, kitchens, labor, construction, etc., are all off limits for almost all Europeans. Imported migrants, legal and illegal, are hired for these jobs.
In Southern Europe– Portugal, Spain, Italy and Greece– paying taxes is a form of sophisticated humor. Cheating is standard. Since all the government employees are corrupt, bribery is universal.
Because of this type of weak governance, debt has grown out of control. The PIIGS owe the rest of Europe 2.1 trillion dollars. This debt cannot and will not be repaid within one decade!
Prior to the formation of the EU and the Euro, the behavior of the PIIGS was not a matter of concern to the rest of the Europeans. Today, with a common currency, the Euro, the northern countries have their currency weakened and therefore they must pay more for their imports and sell their exports for less.
This is like a group of people who want to live in two different cities. Ultimately, they must part ways.
For the foreign currency trader, this means that the Euro will not become a reserve currency, like the U.S. Dollar, and its rate of exchange will drop.
For the people of Europe, the breakup of the EU will allow them to regain their lost cultures. Having one passport is not the only road to happiness. Having one’s own identity is much more important.